KOBE – What would your reaction be if someone proposed a solution that would significantly reduce health costs to the individual and to the country, increase longevity and increase tax revenue (at least in the short term) without any harm to the economy?
Sound too good to be true? Raising taxes on tobacco would accomplish exactly this solution.
Just a few days ago, countries around the world commemorated World No Tobacco Day (May 31). Each year the World Health Organization identifies a different theme. This year, WHO calls on countries to raise taxes on tobacco to encourage users to stop and prevent other people from becoming addicted to tobacco.
In 2012, in Japan, excise taxes on tobacco were $3.10 per pack of cigarettes representing 60 percent of the final retail price ($5.20/pack). If the government of Japan increased the amount of excise tax on cigarette packs by 50 percent (to $4.70/pack) and 68 percent of the final retail price (to $6.90/pack), there would be 1.5 million fewer smokers, and 330,000 smoking-attributable deaths would be averted representing a 3.0 percent decline in the expected death toll from cigarettes.
Furthermore, government revenue from tobacco taxes would increase by around 37 percent representing an extra $11 billion in excise revenue per year that could be used to advance health and other social programs.
For example, if this extra revenue was allocated by the government to its health budget, then public expenditure on health could grow by 2.6 percent per year. In a nation with the highest percentage of persons over 65 years (25 percent) in the world, these added resources could be well used.
And with the leading cause of death in Japan today being lung cancer, any reduction in this rate means less suffering and cost, and more wellbeing. The figures above come from a World Health Organization-created model of the global cigarette market based on data from 145 countries including Japan.
It calculates the impact of higher excise taxes on the cigarette market, public health and government revenue. Additional benefits from such a tax increase include a decrease in national cigarette consumption and a reduction of prevalence of adult smoking of 4.5 percent from 26.3 percent to 25.1 percent of Japan’s current adult population.
WHO Director-General Dr. Margaret Chan has said that “raising taxes on tobacco is the most effective way to reduce use and save lives” and that “determined action on tobacco tax policy hits the industry where it hurts.”
In fact, raising taxes on tobacco in support of reducing tobacco consumption is a core element of the WHO Framework Convention on Tobacco Control (FCTC), an international treaty that entered into force in 2005 and has been endorsed by 178 Parties. Japan was among the first countries to ratify it.
Countries such as France and the Philippines have already seen the benefits of imposing high taxes on tobacco. Between the early 1990s and 2005, France tripled its inflation-adjusted cigarette prices. This was followed by sales falling by more than 50 percent. A few years later the number of young men dying from lung cancer in France started to go down.
In the Philippines, one year after increasing taxes, the government has collected more than the expected revenue and plans to spend 85 percent of this on national health insurance.
High prices are particularly effective in discouraging young people (who often have more limited incomes than older adults) from taking up smoking. They also encourage existing young smokers to either reduce their use of tobacco or quit altogether.
In Japan, a 50 percent excise increase would lead to 200,000 of Japan’s youth no longer taking up smoking when they become adults. Unfortunately some 10.8 million people alive today in Japan are still at risk of dying from diseases caused by continued smoking. And, worldwide, consider that today every 6 seconds someone dies from tobacco use.
Tobacco kills up to half of its users. It also incurs considerable costs for families, businesses and governments. Treating tobacco-related diseases like cancer and heart disease is expensive.
And as tobacco-related disease and death often strikes people in the prime of their working lives, productivity and incomes fall.
Tobacco use is the world’s leading preventable cause of death. Tobacco kills nearly 6 million people each year, of which more than 600 000 are nonsmokers dying from breathing second-hand smoke. If no action is taken, tobacco will kill about 1 billion people by the end of the 21st century — more than 80 percent of them among people living in low- and middle-income countries.
Tax policy can be divisive, but this is the tax rise everyone can support. As tobacco taxes go up, death and disease go down. Not bad for a $1.70 increase in the price of a pack of cigarettes.
Alex Ross is the director of the World Health Organization’s Center for Health Development in Kobe.